Do This ONE Thing To Get The Best Return On Your Home Improvement Project

Do This ONE Thing To Get The Best Return On Your Home Improvement Project

lighterside-staff-authorBy Lighter Side Staff  |  Read More

Before we get to the “one thing”, answer this question:

Do you know which home improvement will bring you the best return on investment?

Don’t look at me. I can’t tell you off-hand.

And don’t go by hearsay, either.

Just because you heard some guy at a party say that remodeling your kitchen or bathroom is the best return on investment, doesn’t mean it is true.

Don’t even go by one of those articles you read online that claim this, that, or any other thing will bring you the best return on your investment.

Because, the best return on investment for any home improvement depends a whole lot on so many factors…

  • Where do you live?
  • What is the market like in your area overall?
  • What is the market like for houses like your specific house?
  • Are you doing the improvement specifically to make more money on the sale of

your home in the very near future?

  • Or will you be selling some time down the road?

But, I can tell you, without hesitation…

No matter where you live…

No matter what the market is like…

No matter what your house is like…

Or when you are going to sell it…

There is one, hands down best return on investment.

You would think any project will increase the value…

I mean, if you remodel your kitchen, that’s certainly got to improve the value of your home, right?

Or taking that 80’s looking bathroom for a trip into the new millennium will definitely get you more money when you go to sell the house.

And going all out and putting on an addition should add tons to your eventual list price when you go to sell.

How about painting the entire house? New carpeting or wood floors? A new furnace?

And you’d be right… to a degree.

You’d definitely add value… make your home worth more… regardless of what home improvement project you do.

But let’s face it, while the options are limitless, your budget is not.

So, you’re smart to stop and consider which project will bring you the best return on your investment.

But the reality is… most projects cost more than they return.

Most home improvement projects you choose to do are not going to make you any money.

Sure, they will raise the value.

But most of the things you could choose to spend money on, will not actually improve the value more than it cost you.

Quite often, the improved value is somewhere in the 60%-70% range of what you spent.

For instance…

You spend $1000 and improve the value, say $600 – $700.

Or, you spend $10,000, and reap the rewards of maybe $6,000 – $7,000.

And, that’s a shock for way too many people… once it is too late.

At least, for people who don’t take advantage of something that will provide a huge return on investment.

If only everyone did this.

But most people don’t, because…

The problem is…

Too often, people just decide to do a project and presume that it will raise the value more than it costs.

No harm, no foul if they did it and were staying in the house for years to come.

But a lot of times, people are doing renovations because they’re thinking of selling soon, and figure it makes sense to do whatever project strikes them as the most bang for the buck…

… without speaking to a real estate agent first.

Then, they excitedly invite an agent over. They want to list their home and can’t wait for how impressed the agent will be.

And, the agent is impressed!

But, the homeowner is not impressed with the value the agent comes up with. Seems the project wasn’t worth the money spent.

So, the agent becomes the enemy. The agent becomes the scapegoat. The whipping post.

Like they don’t know what they are talking about… or don’t see the value… or just want the owner to price it low so they can make a quick sale.

The best things in life are free…

Real estate agents are often villainized for making too much money. Or being pushy. Or out to make a quick buck… (Let’s not even get into those misperceptions here…)

But the reality is, agents are undervalued and underutilized.

To just go ahead and do a home improvement because you think, heard, or read that something is “the best return on investment”, is a huge mistake.

Going the opposite route, and not doing a particular project because some yearly report you found online says that a home improvement only returns 53% of the investment, could be just as big a mistake.

It totally depends on your area. Your home. Your plans.

And a local real estate agent can help you figure out which home improvements will actually add value to your home and be worth the money you spend…for your home, in your area, given your plans.

Yet, way too often, a real estate agent isn’t called until the moment someone wants to put their home on the market… when they could have been, and should have been, called before the project was done. And they would have come out for free.

I will repeat that…

… for free.

So make sure you do this ONE thing…

Simply pick up the phone and call your agent before you do anything, or spend anything on improving your home.

This is undeniably the best thing you can do to get the best return on your home improvement project.

Your agent is going to be the best source for the best advice as to what your best return on investment will be for your situation.

It might be doing your kitchen.

It might be remodeling the bathroom.

It could be as simple as painting. Or a good cleaning. Or decluttering.

No article or report can tell you… and the guy at the bar can’t tell you, either (unless he or she happens to be a local real estate agent and knows your house, your market, and your situation.)

Buying a Home: 5 Things You Need to Ask About Your New Property

Tips For Buyers

What's Included With the Property? 5 Questions to Ask

As a home buyer, you may already know that the furniture and any personal items in the home will go with the seller once the sale is complete. However, there may be other items in the home, or attached to the home, that may be less clear as to weather they should be included in the sale or not.

This checklist will help you determine which items you may expect to keep, as well as your rights and responsibilities concerning landscaping and water features running along the property line.

1. Which Appliances Are Included?

Determining which appliances will stay in the home and which ones will be taken by the current owner is a matter of distinction. Appliances that may be easily removed and replaced, such as a washer, dryer or refrigerator, are often removed after the sale is complete. However, some appliances are often sold with the home to enhance the homes desirability. Appliances that are considered a fixture of the home, that would require extensive work to remove them and would leave a noticeable gap in their absence, usually stay with the home. These include ranges, built-in microwaves and dishwashers. Your real estate agent should be able to tell you which appliances stay and which ones the seller is taking with them.

However, if you really like the refrigerator or laundry setup, ask your agent to include them with your offer to purchase.

2. Can I Keep the Fixtures?

Unlike appliances, it is usually pretty clear which fixtures should remain with the home. Fixtures are more permanent aspects of the structure, such as the window blinds, light fixtures, flooring and faucets, and are often updated by motivated sellers in competitive areas before listing. Even ceiling fans are typically considered fixtures, and left with the home.

Anything that might be considered personal property, such as curtains, bookcases not attached to the wall or movable storage units, may be taken by the seller and not included in the home sale. Though it never hurts to ask if they might leave the items and include them in the sale. 

3. Which Outbuildings Will Remain?

Although many properties only have one building with a garage included, other properties may have one or several outbuildings. These might include a detached garage, a studio, guest house or storage shed. Permanent structures are almost always included in the purchase contract, as they cannot easily be removed from the property without causing damage to the unit itself or the property where it stands.

However, some storage sheds can be in a gray area. If in doubt, ask your agent or investigate the tax records of the property which are usually online. If the building is not included, then you may have to ask for it to be included with the purchase.

4. Who Owns the Fences and Trees?

If the property has a fence running along the property line but does not adjoin with fences of your prospective neighbors, it is fairly obvious who owns the fence. A fence that would be used exclusively by you, as the owner, would be completely owned by you in most cases. However, fences that are built to be used by owners on both sides of the fence may be owned by both, depending on the laws of the city and state you live in.

Regulations are similar for trees growing on the property line. If the tree grows on both properties, both owners may have access to and responsibility for the tree.

5. What About Public Waterways on or Next to the Property?

At first, the idea of purchasing a property with a creek running through it seems terribly romantic. However, if the waterway is large enough, you may have to deal with the public running through it as well. If the stream running through the land is considered navigable (often defined as an average width of 30 feet or more), in many states, you may have to allow the public to pass through on it.

Water rights, beach access and water frontage rights are all very state-specific. For example, in many locations, property owners on the water’s edge may not obstruct public access to the water, although they may not be required to permit people access to their land. Many states are eager to protect the rights of private property owners, even when that property runs adjacent to a public waterway. Questions regarding water rights, beach and shore access should be directed to your real estate agent or broker or an attorney.

There are standards sellers follow when they sell a home, and you should know what they are. With the answers to these five questions, you can understand what you get to keep, and what items go with the sale of the property.

Seattle Times: City Council approves limits on renters’ move-in costs, taking aim at housing crisis

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Seattle Times staff reporter

It’s not rent control, which state law prohibits Seattle from enacting. But City Councilmember Kshama Sawant thinks this ordinance is the next-best thing.

The council voted unanimously Monday to pass the Sawant-proposed legislation that will cap the move-in money landlords are allowed to charge and to give renters the right to pay their move-in costs in installments.

Property owners and tenants packed the council’s chambers to make their views known, spilling over into a room downstairs where the meeting was shown on a screen.

“You’re declaring war on us,” said one landlord among dozens who slammed the ordinance as unfair during the council’s public-comment period.

Not every property owner spoke against the legislation. One urged other landlords to “put people before profits” by trying to make housing in Seattle more affordable.

Supporters of the ordinance said many renters simply don’t have enough money to immediately cover a hefty security deposit, first month’s rent, last month’s rent, screening fees, cleaning fees and other costs.

One renter told the council that move-in costs kept her from leaving a living situation that involved domestic violence.

Gwendolyn Jimerson of the Seattle Education Association said many public-school educators can no longer afford to live in the city, partly due to move-in costs.

People of color are having a particularly hard time, said Jimerson, who represents her union’s paraprofessionals.

“I’m seeing it a lot,” Jimerson said. “98118 is the ZIP code I work in (Southeast Seattle), the most diverse ZIP code in the city. In three to five years, it’s not going to be that way, because families of color aren’t going to be able to stay.”

The ordinance will limit the combined costs of a security deposit and any nonrefundable fees to no more than the amount of the first month’s rent. It will limit pet-damage deposits to 25 percent of the first month’s rent.

Renters will have the right to pay their move-in costs in installments or according to alternative plans agreed to with their landlords.

The council voted 5-3 to approve an amendment sponsored by Councilmember Rob Johnson that exempts landlords who live on-site.

The property owners opposed to the ordinance described themselves as “small landlords” with modest holdings, as opposed to large corporations with multiple apartment complexes.

Some said the legislation would prompt them to raise rents, while others warned that the legislation would push them to sell their properties. That could result in older rentals being torn down and replaced with pricier buildings, they said.

By capping the size of security deposits and forcing landlords to take move-in money in installments, the ordinance will expose owners to greater risk, they said.

Frank Au, whose family inherited homes from his mother-in-law, was in the group urging the council to squash the legislation.

Au said he recognizes some renters are struggling to stay in Seattle. “They have a good point. They don’t have the money,” he said.

But some landlords work harder, longer hours than their tenants, and some renters don’t need the help, he said.

“My mother-in-law, she came over from Vietnam, six children, didn’t know how to speak English. She bought her first rental,” Au said.

“Walk around on a Saturday and a Sunday. Look at all the tenants who have big-screen TVs … Look at all the tenants buying these goodies, while all the landlords are working.”

Seattle Times: Facebook could double Seattle presence with another big new office

Facebook is only 12 years old. Love it or hate it, this company has changed the world (and our city) in some drastic ways.

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Seattle is already home to Facebook’s largest engineering office outside its Silicon Valley headquarters, and the company is leasing another South Lake Union project.

 

Facebook, which just opened a big Seattle office, is expanding again by leasing a pair of new South Lake Union buildings with the potential to double the tech giant’s presence in Seattle.

Paul Allen’s Vulcan Real Estate announced Friday that Facebook will be the sole office tenant of its new $246 million Arbor Blocks project along 8th Avenue between Harrison and Thomas streets.

 

The two buildings will total 383,900 square feet of office space when they open. For perspective, Facebook this spring just moved most of its roughly 1,000 employees in the area into a new building on Dexter Ave N. that is 335,000 square feet.

The current Facebook office has potential to hold about 2,000 employees total, and the upcoming offices are slightly bigger.

Construction on the Arbor Blocks project, which consists of two six-story offices with ground-floor retail, is slated to start later this month. Facebook could move in during the third quarter of 2018.

The Menlo Park, Calif.-based company first opened an office in Seattle in 2010 and the city now houses its largest engineering outpost outside of its Silicon Valley headquarters.

Seattle-based teams have led development of the Facebook Messenger chat service’s video calling and the “cold storage” technology that helps company data centers more efficiently store the photos and other content people post to the social-networking site, among other initiatives.

“Seattle is really a key part of our long-term mission,” Mike Schroepfer, Facebook’s chief technology officer, said in May.

Vulcan is also building the new Google campus in South Lake Union and has built most of Amazon’s constellation of buildings in the neighborhood.

Information from the Seattle Times archives was used in this report.

Seattle PI: Seattle’s most popular neighborhoods for renters

A breakdown of the 10 most popular Seattle neighborhoods:

By KIRSTEN O’BRIEN, SEATTLEPI.COM

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Seattle’s rental market is undoubtedly hot, but some neighborhoods are much hotter than others.

San Francisco-based Zumper analyzed thousands of calls and emails made through their rental listing service in May to identify the 10 most popular neighborhoods and bedroom types.

The data show those moving to Seattle like their peace and quiet: 31 percent of all inquiries were for one-bedroom apartments at a median price of $1,350. Studios were the next highest in demand with 25 percent of the inquiries at $1,500. Three-and-four-bedroom apartments generated the least amount of interest. Three-bedroom units accounted for 16 percent of the inquiries at $2,650, while four-bedroom units garnered just eight percent at $3,000.

The demand for solitary dwellings could be a partial result of Seattle’s tech boom, which has brought a massive influx of young, highly-skilled workers to the Emerald City over the past few years. The Seattle metro area grew by 1.6 percent from 2013-14, making it the 15th largest metropolitan area in the United States.
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But living alone has also become something of a nationwide pattern. Findings from Zillow show more Americans are living alone than ever before. The study found almost 15 percent of middle-aged adults reported living alone at the end of 2015, up from around 11 percent in 1976.

Perhaps surprisingly, the Zillow study found young adults were no more likely to live alone than they were a generation ago, with the exception of women in their mid-twenties. Around 10 percent of young women live alone compared to roughly seven to eight percent a generation ago.

If you’re in the market for a new spot, scroll through the slideshow above for a breakdown of the most popular neighborhoods for renters. Keep in mind: High demand means stiff competition, and some might have better luck looking for homes outside the city center in North or South Seattle.

Seattle Times: Mayor’s plan for Seattle’s U District: taller buildings, some affordable housing

Have you been wondering how the new light-rail station will affect Seattle real estate? Here are some facts:

By Daniel Beekman Seattle Times staff reporter

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Seattle Mayor Ed Murray was met with boos as well as cheers outside the University Heights Center on Monday as he unveiled a growth plan for the University District that includes major changes to the size of buildings allowed in the area.

The proposed zoning changes, now headed to the City Council, would allow buildings as high as 320 feet in one part of the neighborhood and 240 feet in a few other parts.

Murray said the idea is to direct growth in the U District to blocks near the University of Washington campus and the new light-rail station scheduled to open in 2021 on Brooklyn Avenue Northeast between Northeast 43rd and Northeast 45th streets.

With many people moving to Seattle and rents on the rise, more affordable housing is needed, the mayor says. The zoning changes, by allowing developers to build taller, would trigger a new program requiring them to include some rent-restricted units in their projects or pay to help build such units elsewhere, he said.

“This plan is about getting growth right in Seattle,” Murray said minutes after visiting an Interstate 5 offramp where a motorist hit and killed a man in a tent early Monday.

“The conversation we’re having today cannot be divorced from the tragedy that happened this morning,” the mayor said, connecting his U District plan to Seattle’s homelessness crisis. “We simply have to create more affordable housing.”

The UW has been pushing for its namesake neighborhood to grow into a dense “innovation district” for tech startups and workers. But skeptics are concerned about low-income residents, small-business survival and open space.

Two dozen opponents crashed Murray’s event with signs bearing messages such as, “Revise the rezone,” and “Don’t Ballardize the U District,” referring to growth in Ballard.

Kate Robinson lived in Ballard until recently and said the new buildings there cater to people with money. She’s now worried what the zoning changes would mean for the U District business she co-owns, Cafe Allegro.

“I’m afraid every day we’ll be displaced,” she said. “We’ve been here for more than 40 years, but if our building is torn down and redeveloped we’ll have nowhere to go.”

Erik 4-A, who runs a recording studio out of the U District building he owns, is also upset. He says the changes would boost his building’s value — and his property taxes.

“I’m concerned we’re being pushed out,” he said. “I’ll have to sell, and then what? There’s nowhere in Seattle where I’ll be able to afford to do what I do.”

Ethan Phelps-Goodman, a software developer who went to graduate school at the UW, offered a different take. Murray’s plan includes incentives for developers to provide open space, child-care facilities and sidewalk improvements, he noted.

“Tons of change is going to come to the U District with light rail — more people, and there’s no way around that,” Phelps-Goodman said, wearing a button with the slogan, “Yes to the future — upzone the U District.”

He added, “If we invest billions in rail, how can we not build housing near that rail?”

Murray said 40 to 275 U District homes, many of them with relatively low rents, will be demolished in the next 20 years with or without the zoning changes.

He says 620 to 910 rent-restricted units would be created through developer requirements if the council approves the changes, plus up to 5,000 market-rate units.

Opponents of the plan dispute those numbers. They say the plan endangers many more homes with relatively low rents.

The council’s land-use committee will discuss the changes in detail during a 9:30 a.m. meeting on Sept. 20 and will hold a public hearing in November.

Last year, the council approved the creation of a new, larger business improvement area in the U District over opposition from some condo and business owners.

Daniel Beekman: 206-464-2164 or dbeekman@seattletimes.com. On Twitter @DBeekman

Helping buyers win with multiple offers — holding the right cards

Four aces

 

If you’ve been looking for a home these past two years, or in the pre-bubble era in the mid-aughts, you likely have been party to a disappointing result in making an unsuccessful offer on your dream house while competing against several (or many) other bidders.  Low inventory and the improving economy has created this perfect storm for buyers.  Especially in the entry to mid level price ranges in Seattle ($400-$1M), bidding “wars” are the norm, not the exception.

After 26 years of brokerage work and participating and winning in hundreds of these scenarios, we’ve learned there are several essential components to putting together a “winning” bid.  In order of importance:

  • Price.  At the end of the day, a good listing (seller’s) agent will be careful to ensure that the seller is getting the most money out of the sale.  I recall submitting an offer many years ago on a then-$2,000,000 house in Magnolia, owned by a prominent Seattle family.  When I presented to the listing agent and the owner’s son, I gave a long pitch about how great my buyer’s were, how they’d continue the legacy of ownership, and gave them a letter from my buyers — now known as the “love letter.”  The son looked at me and said: “This is great.  Really appreciate it.  And my mom will never see this letter.  This is a business transaction.”  I understand that, and in some cases a warm fuzzy might be worth slightly more than an all-else-equal nod.  But just slightly more.
  • Contingencies. This is where you can differentiate yourself.
    • Inspection Waiver:  When expecting multiple offers, we always recommend a pre-inspection so that our buyers can go into their offer without this standard contingency as part of the package.  We have negotiated with several inspectors to do an oral “quickie” inspection that covers all of the major systems, but is half the cost of a written report and can be done in an hour or two.  In addition, after hosting so many inspections, we can typically forecast for our buyer what we think might get called out in the process so we can get bids for whatever work might be needed.
    • Financing:  Ideally we get so confident of our buyers’ ability to qualify for a loan (and the house’s ability to appraise)  through our preapproval process that we can enter into a purchase and sale without a financing contingency.  This does mean if you can’t get a loan…you lose that earnest money.  So there’s a risk that we need to get comfortable with.  But it helps you compete against “cash” offers, because at the point you waive the financing contingency, even if you subsequently get a loan…you’re the same risk to the seller as a “cash” buyer.
    • Other – Home sale contingencies are nearly impossible to sell in this type of scenario.  RPA does bridge financing in some cases, and we have other strategies we employ in the situation where our buyer has another home to sell.
  • The intangibles
    • That love letter isn’t valueless.  We help our buyers write it and we included it with the offer
    • Offer presentation – if we can, we want to meet with the seller and we want to be the last broker to do so.  We want you in the parking lot when we do it so if we need initials on a counteroffer, we can get them right away.  There’s more to it than that, but the idea is that we want to close this with them before they bring back other buyers for a “highest and best round.”
    • Relationships — I would never suggest that we leverage our relationship with a listing agent to the detriment of their client.  But in this bidding frenzy, having been a broker in Seattle for so long and having worked with most of the top agents in the city, experience and reputation are HUGE differentiators.  As a listing agent, with whom would you rather work?  An agent you’ve worked with in the past (or one who has worked with your coworkers) who is known to have the experience to close deals?  Or a new agent, or someone’s assistant, or an agent working for a salary without that incentive to get paid on the closing?  There’s at least one good reason to pay a broker a commission — it’s because we get paid on performance — at closing —  not just on satisfaction.

There’s a list of criteria that we have when on the other side of this table, representing the seller as a listing agent — most of which our buyer’s list takes into account.

Good luck…at least in this game, we get to pick the cards we want to play!

Gordon Stephenson

Co-Founder and Managing Broker
Real Property Associates, Inc.

1031 Exchange — Reshuffling the deck

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The IRS Section 1031 exchange is a real estate investor’s best tool for avoiding (deferring) capital gains on the sale of real property.  In a nutshell, the strategy is to sell one piece of appreciated real estate (it can be a house, condo, raw land, or commercial building or multifamily property, as long as it was held for investment and is in the U.S.), and when selling, exchange the proceeds into up to three potential target properties.

An example would be:  You have a home in Greenlake that you bought back in ’88 for $88,000.  After you moved out to the ‘burbs in Lake Forest Park, you kept the house and rented it out.  Now it’s worth $488,000, but it’s only renting for $1300.  Your most excellent RPA agent thinks you can buy a fourplex for that much, and get twice the rent.

So you put the bungalow on the market, and it sells in three days (hot market).  You get $500,000.  The 1031 rules require that you identify potential “replacement” properties within 45 days of closing on the “relinquished” property….so you still have some time, but since your closing on the bungalow is in 30 days…you only have 2.5 months.  After closing, in 30 days, you’ll have a total of six months to close the target property.

You make the offer on the Shoreline fourplex, subject to the closing of the bungalow.  Bungalow closes.  A few weeks later, you close the fourplex.  Cashflow doubles.  And here’s the tax advantage:  If you had just taken the proceeds out of the bungalow, you would have paid capital gains on $500,000, minus the closing costs (commissions, excise, title), minus your $88,000 basis (and less depreciation on that basis).  Let’s say that was $460,000 net sales price, minus $88,000 = $372,000 in gain.  You would likely pay 15% in capital gains taxes, plus Obamacare of about 3%.  18% of $372,000 is a tax bill of $67,000.  But you don’t have to pay that tax now.  The 1031 allows you to exchange your low basis into the new property (and if you buy something more expensive, the basis increases by that difference).   You can do this again and again….fourplex into 10 unit building.  Three houses into a commercial office building.  Vacant land into a rental house in Palm Springs.  You can keep shuffling as long as you follow the rules.  And if you play long enough…you will never pay the gain.  Your estate will take over those properties at their stepped up basis (subject to estate tax limitations).

There is a cost.  Our preferred “exchange facilitator” is this guy: http://1031exchange.net/craig.asp.  Craig just completed an exchange for a long time client, who sold her former home in Bellevue and bought a triplex in Ballard.  His total fee was $1,000 to handle the funds and complete both ends of that exchange.

We do these for clients all the time, successfully.  There are innumerable permutations — you can pull cash out for example, and step down in value (you pay tax on that “boot” which you pull out).  Please call … we can help you get better cards.

Banks’ Clocks still ticking?

Over three years into this, and we’ve lost many of our local banks:  Shoreline Bank, Evergreen Bank, Frontier Bank, Citibank (of Lynnwood) — all taken over by the FDIC. 

Still alive?  Seattle Bank is fighting a lawsuit in California that threatens its imminent recapitalization.   I like these guys, and I’m hoping they prevail.  Homestreet Bank, the once proud family-owned Continental Savings, which used to be one of my favorites, is on my prayer list — as in the hit song, “I’ll pray for you.”  I hear no good news out of those quarters and from my personal accounts, see their approach to workouts on their bad debts to be fully counterproductive.  First Financial Northwest, fka Renton Savings, has had its stock pounded to as low as $3.50/share – but they’ll make it.  Sterling Savings Bank, which is one of the largest regional banks (behind Washington Federal), closed on a $700mm recapitalization and is out of the woods.  They get five stars for their handing of our accounts and development projects during this crisis.  Hope the recap can propel them into bigger and better things. 

It’s getting to be a bad habit seeing the Friday afternoon updates coming through from the FDIC on my Android.  Hope we see the day — and soon — when those announcements cease altogether.

Q: How do I sell a property that is held by an LLC?

A:  An LLC, or Limited Liability Company, is controlled by one or more managers.  Typically the manager will be granted the authority to convey real property by the “LLC Operating Agreement.”  It is a good idea to get a copy of this Agreement early on in the course of a transaction and to get it to the Title Company well in advance of closing so they can verify there are no issues with the Manager’s authority.  I get a copy of the Operating Agreement when I take the listing agreement with the seller so that we avoid any hangups on down the line.